Financial Planning Tips for Small Business Owners

Everyone can benefit from financial planning, but creating both a personal financial plan and a business financial plan has multiple benefits for small business owners. Although business planning and personal financial planning are two separate disciplines, each impacts the other, so it’s important to consider both as you work to secure your short—and long-term financial well-being.  

Here, we’ll share why it’s important to keep business and personal finances separate—and how to manage them both accordingly.  

Building and Growing Your Business  

Crucial decisions made at the outset, like how a business is structured, have consequences that tend to multiply over time. A financial advisor can help you understand the implications of sole proprietorship versus choosing to create an S Corporation (S Corp) or founding a limited liability company (LLC). 

In young businesses, a financial planner can help you explore funding options since, too often, small businesses are funded at an extreme expense to founders and owners. For early-stage companies, it’s particularly important to focus on liquidity and maintaining good credit. At the same time, small business owners have to not only pay themselves but also find ways to invest and grow the business.   

As businesses grow, strategies are needed to deal with issues like billing and creating predictable revenue to cover day-to-day expenses. Simultaneously, individuals have to manage their household cash flow and expenses. Financial plans help prioritize and then balance these different needs.  

Excelling as a Business Owner  

Running a successful business should not only lead to profits but should also increase one’s personal fulfillment and joy. However, owning and operating a small business also potentially exposes your personal wealth to risk, as well. It’s important for small business owners to manage risks with the right business insurance and other strategies that shield personal assets from business losses. Start by considering:  

  • Insurance, including general liability insurance, professional liability insurance, workers compensation insurance, and more.  
  • Cash-flow planning, including how you will pay yourself, employees, and important vendors from business funds    
  • Benefits and drawbacks of different credit and funding options 
  • Employee benefit policies, and  
  • Policies to mitigate loss from fraud or theft  

Entrepreneurs benefit from monitoring and regularly reviewing their books, though as a business grows, the actual bookkeeping may go to someone else. Similarly, business tax planning is considerably more complex than personal tax planning and can have significant consequences if mistakes are made. As a result, growing businesses usually manage taxes with the help of professionals. In growth phases, businesses may need to raise additional capital and should consider an array of strategies for doing so.  

 Business owners should also consider whether their personal portfolio is sufficiently diversified beyond their business. Just as they think of the types of insurance their business may need, they should also consider what insurance is appropriate for their families. Similarly, they should consider whether they could improve their personal finances with better tax planning and preparation.  

Think About The Future  

Every small business owner deserves to enjoy life on their own terms and to retire when and how they see fit—but that requires additional layers of planning on top of conventional retirement planning: succession and/or exit planning.  

  • Succession planning involves selecting and often training the person who will take over the operations of your small business after you step away.  
  • Exit planning, on the other hand, involves preparing your business for sale. The most successful and satisfying plans may involve both succession and exit planning.   

Of course, succession and exit plans often coincide with a personal retirement plan, and coordinating between retirement and a business transition makes sense. The same could be said for estate planning—for small business owners, an estate plan should include the disposition of their business as well. For the conscientious business owner, these plans are about more than a payout for the business and a chance to step away—concerns about the well-being of clients and employees are also taken into account.  

Make Adjustments  

A plan is not a set of commandments etched into stone for all time. Situations change, especially in dynamic economic conditions. Any financial plan, business or personal, should be reviewed annually.  

Never lose sight of where your business is right now and take advantage of opportunities that present themselves. Business owners should also always think ahead—and not just into retirement. 

How will the business look in one year? Five years? 10? What will your participation be like in five years? 10? If you’re near the point of executing an exit plan, have you done all you can to maximize the value of your business?  

Ideally, you are accumulating a team of trusted professionals to help you run and grow your business. A financial advisor is ideal to sit at the center of it all—coordinating tax, personal wealth, business, insurance, investment, retirement, and exit planning strategies—to find synergies and create the right solutions for your business and personal plans.   

Working with someone experienced in helping individuals and entrepreneurs brings it all together so you can be confident in your future.  


At Opal Wealth Advisors, we can help you balance the financial needs of your business with your personal financial life to make sure both are running as efficiently as possible to secure your future. To learn more about how we work with business owners in Long Island, please visit us here 


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